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Lesson 8: SPA Capitalization Indicator Transcript

Introduction

Welcome to the Fiscal Management online training video on the State Property Accounting (SPA) capitalization indicator.

After viewing this training, you should have a thorough understanding of:

  • The capitalization indicator (C/I indicator)
  • How an asset becomes capitalized versus inventoried

Capitalization Indicator

Depreciable entities may or may not be capitalized based on criteria established by the Comptroller’s office. For all components, property will be evaluated against capitalization thresholds using the sum of all financial transactions that have effective dates within the same fiscal year and are within a unique property number.

How does SPA assign the capitalization indicator? When a financial transaction is entered, SPA will sum all existing depreciable entities for a property number across all components that exist for the fiscal year that the financial transaction affects. This sum is compared to the capitalization threshold established in the class code. The depreciable entity is capitalized if:

  • The asset value exceeds the capitalization threshold of the assigned class code. OR
  • The sum of all additions within one fiscal year exceeds the capitalization threshold.

If the asset value is less than the capitalization threshold, the asset is considered Inventoried.

C/I Indicator Example

Let’s look at an example of how the Capitalization Indicator (also called the C/I Indicator) works in SPA.

On April 8, 2011, an asset is purchased and assigned property number 0101 with a cost of $2,000.00 and class code 135 that has a capitalization threshold of $5,000.00 and falls under AFR category 4, the Furniture and Equipment category. Since the $2,000.00 value does not meet the capitalization threshold, the C/I Indicator for the property will be an I for "inventoried."

PROPERTY CPNT ENT_FY DESCRIPTION C/I ACQN COST 2011 VALUE
0101 01 2011 CC 135 ASSET I $2,000.00 $2,000.00

Then, On June 17, 2011 a second component is added to the property with a value of $2,000.00
The asset will appear in SPA as two components, each with a value of $2,000.00, for an overall property value in fiscal year 2011 of $4,000.00. Since the property value of $4,000.00 does not meet the capitalization threshold, the C/I Indicator for the property remains as I for "inventoried."

PROPERTY CPNT ENT_FY DESCRIPTION C/I ACQN COST 2011 VALUE
0101 01 2011 CC 135 ASSET I $2,000.00 $2,000.00
0101 02 2011 CC 135 ASSET I $2,000.00 $4,000.00

C/I Indicator Example

On Aug. 4, 2011, a third component in the amount of $2000.00 is added, bringing the total property expenditure for fiscal year 2011 to $6,000.00. This amount exceeds the capitalization threshold of the assigned class code. All fiscal 2011 components for the property are capitalized, and the C/I indicator is changed from an I to C for all three components. The asset appears in SPA as follows:

PROPERTY CPNT ENT_FY DESCRIPTION C/I ACQN COST 2011 VALUE
0101 01 2011 CC 135 ASSET C $2,000.00 $2,000.00
0101 02 2011 CC 135 ASSET C $2,000.00 $4,000.00
0101 03 2011 CC 135 ASSET C $2,000.00 $6,000.00

Three property components will be listed on the year end capital asset report (CAAB101D) as fiscal 2011 additions totaling $6,000.00 under AFR category 4.

C/I Indicator Example

Now let’s say a fourth component is added to the property in the amount of $2,000.00 on Oct. 1, 2011. This becomes a fiscal 2012 addition, and, because it does not meet threshold, the component is assigned an I and is not capitalized. The asset appears in SPA as follows:

PROPERTY CPNT ENT_FY DESCRIPTION C/I ACQN COST 2011 VALUE 2012 VALUE
0101 01 2011 CC 135 ASSET C $2,000.00 $2,000.00  
0101 02 2011 CC 135 ASSET C $2,000.00 $4,000.00  
0101 03 2011 CC 135 ASSET C $2,000.00 $6,000.00  
0101 04 2012 CC 135 ASSET I $2,000.00   $2,000.00

Because it is now fiscal 2012, the current fiscal 2012 financial reports will not reflect the fourth component as the component does not meet the threshold. However, the fiscal 2011 components will still appear on the fiscal 2012 reports as they are capitalized expenditures and will remain on the report until they are disposed.

This point illustrates that the capitalization indicator is determined based on the expenditures in each fiscal year. Once again, SPA assigns the capitalization indicator by summing all expenditures for a property number across all components that exist for the fiscal year the financial transaction affects.

Once Capital, Always Capital

It is also important to note that once an asset becomes capitalized for that fiscal year, it will always be capitalized. The only way that a C/I indicator on an asset will change from C capitalized to I Inventoried is if a financial transaction decreases the value of an asset below the capitalization threshold during the current (open) fiscal year.

Once a fiscal year closes and an asset is capitalized (C) , it must always remain capitalized, even if the value decreases below threshold in a future fiscal year.

C/I Indicator and Updating Asset Value

Now let’s look at an example of the C/I Indicator when an asset changes in value within the current (or open) fiscal year.

On May 12, 2011, asset 0202/component 01 is added to the system with a class code of 203 and a value of $5,000.00. The threshold for this class code is $5,000.00, therefore the asset is capitalized.

PROPERTY CPNT ENT_FY  DESCRIPTION  ACTION C/I ACQN COST 2011 VALUE
0202 01 2011 CC 203 ASSET ADD C $5,000.00 $5,000.00

Then, on May 23, 2011, value is added to component 01 in the amount of $4,000.00. This makes the total asset value for asset 0202/component 01 $9,000.00 and the entire value is capitalized in SPA.

PROPERTY CPNT ENT_FY  DESCRIPTION  ACTION C/I ACQN COST 2011 VALUE
0202 01 2011 CC 203 ASSET ADD C $4,000.00 $9,000.00

C/I Indicator and Updating Asset Value

On June 4, 2011 (in the same fiscal year), the asset value is decreased by $5,000.00. This brings the total asset value to $4,000.00, which is now below threshold. Because this decrease has occurred within the current (or open) fiscal year, the asset will now become inventoried and is assigned an I.

PROPERTY CPNT ENT_FY DESCRIPTION ACTION C/I ACQN COST 2011 VALUE
0202 01 2011 CC 203 ASSET DECREASE I ($5,000.00) $4,000.00

An asset 0202 is no longer a capitalized asset, it will not appear on the year-end financial report (CAAB101D).

C/I Indicator Manual Overrides

In a limited number of cases and at the agency’s request, the Comptroller’s office may manually override the SPA capitalization indicator to capitalize an asset.

In order to manually override the C/I indicator from an I to a C, the Comptroller’s office requires that the In-service date of the last capital addition be within one year of the current fiscal year date.

Please note that the Comptroller’s office can never change the indicator from capitalized (C) to inventoried (I).

C/I Indicator – Asset Tagging

Something else to keep in mind with the C/I Indicator is this — the manner in which an asset is tagged affects the capitalization indicator.

For example, a monitor, CPU, keyboard and mouse could be tagged many different ways, including:

  • One property number with one single component
  • One property number with a component for each item
  • Multiple property numbers with one component each

If multiple property numbers are used, it is less likely each item would meet the capitalization threshold.

Conclusion

Thank you for viewing this presentation. This concludes the SPA training on the Capitalization Indicator (C/I Indicator).

For more SPA training and other Fiscal Management training opportunities, log on to Training Center on FMX.


Glenn Hegar
Texas Comptroller of Public Accounts
Questions? Contact statewide.accounting@cpa.texas.gov
Comptroller.Texas.Gov | FMX
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